Financial Penalty Protection for Bank Officials

civil monetary penalty insurance

Financial Penalty Protection for Bank Officials

In recent years, there have been more regulatory investigations into the actions and spending of directors and officers of financial institutions. This has resulted in penalties directly against those individuals. As such, civil monetary penalty insurance was introduced as a countermeasure to assist those individuals.

What is CMP?

Civil monetary penalty, or CMP, insurance was designed to help banking directors in the event an administrative penalty was levied against them. The traditional directors and officers liability insurance do not cover the individual penalties the FDIC imposes. This policy can cover up to $250,000 of a penalty for a single officer or director. Due to the recent financial crisis, the FDIC has been cracking down on financial institutions, even more, causing this type of insurance to be a welcome addition for bankers.

Why Is It Important?

A financial institution is covered under insurance, but directors and officers are not when it comes to FDIC regulatory investigations and penalties. To mitigate personal risk, these individuals face, CMP policies were introduced. Now, banking officials can be covered and protected if a penalty is brought against them.

If you are a financial institution director or officer, you need civil monetary penalty insurance for extra protection if you are served with regulatory fines. Your banking institution is covered, and you should be, too.

Two Common Coverage Options for Banks

business insurance for banks

All businesses need to find a way to mitigate risk, and banking is not exempt as it carries its own hazards and unforeseen obstacles that need to be planned for. Traditionally, insurance industries have helped manage these pitfalls. Many coverage providers help protect banks by providing diverse policy options. Below are two main categories which can provide those unsure or uninsured with a better picture of how business insurance for banks can help them.

Traditional Banking Risk Coverage – As the banking industry is vastly complex and incessantly changing, it can often be beneficial to have insurance that covers the day-to-day, normal situations that arise just by doing business. These sorts of liabilities can include money due for breaking banking laws, issues arising from discrimination in hiring, arguments among shareholders, fraud and more.

Company Risk Coverage – This category is more broad and covers the assets side of the bank. Many things are covered in this category, including the buildings of operation or company properties more generally, certain natural disasters like earthquakes, losing money due to the company being temporarily unable to operate and more.

These are two of the general area that business insurance for banks cover. Each individual policy may reflect the needs of a specific company, so speak to a professional if you want to learn more about the options available for your financial institution.